October 29, 1998
Richard A. Mantey
President/CEO
Ulster Federal Credit Union
P.O. Box 2310
Kingston, NY 12402
Re: Your August 7, 1998 FOIA Appeal - Final Response
Dear Mr. Mantey:
On July 10, 1998, the Concerned Credit Unions of the Hudson Valley
(your group) filed a Freedom of Information Act (FOIA) request
for the community conversion applications NCUA received from TEG
FCU, Hudson Valley FCU and Mid-Hudson Valley FCU. The Acting
Regional Director of NCUA's Region I Office denied your request
on July 21, 1998. The applications were withheld in full pursuant
to exemption 5 of the FOIA. Your group appealed the denial on
August 7, 1998. You have agreed to act as liaison for the group.
Your appeal is granted in part and denied in part pursuant to
FOIA exemptions 4, 6, and 8. As liaison for the group, we are
sending you copies of three redacted community conversion applications
along with an invoice for the cost of photocopying and secretarial
time. A copy of this letter, without the enclosures, will be
sent to all members of your group. Thank you again for acting
as liaison.
Upon initial review of the appeal, we determined that exemption
5 may not be appropriate to withhold the three applications in
full. Because the applications contain information that could
be subject to exemption 4 of the FOIA (financial or commercial
information that may be privileged), on September 2, 1998, we
gave the three credit union applicants (the submitters) an opportunity
to comment on any information that could be withheld pursuant
to exemption 4. This submitter notice is required by Executive
Order No. 12,600 and Section 792.29 of the NCUA Regulations, 12
CFR 792.29. TEG FCU has no objection to release of its entire
application; Hudson Valley FCU and Mid-Hudson Valley FCU both
believe that various parts of their respective applications should
be withheld from disclosure pursuant to exemption 4 of the FOIA.
Hudson Valley FCU and Mid-Hudson Valley FCU both submitted responses
to the submitter notices outlining their objections.
We have reviewed the community conversion applications in light
of all of the FOIA exemptions and the submitters objections pursuant
to exemption 4. The applications are released with redactions
pursuant to exemptions 4, 6 and 8 of the FOIA as described below.
The redacted applications have been reproduced on paper marked
DRAFT because they have not yet been acted on by the NCUA. The
draft applications are subject to modification by the applicant
FCUs. NCUA staff may contact the applicant FCUs to suggest modification
during review of the applications.
The enclosed copy of the draft applications indicates where information
has been withheld, which FOIA exemption applies, and how many
pages have been withheld. A discussion of the information withheld
and the applicable exemptions for all three applications follows
the listing of information withheld from each application.
TEG FCU application
As noted above, TEG FCU had no objections, pursuant to exemption
4 of the FOIA, to release of its entire application. Certain
information in the application is being withheld subject to other
FOIA exemptions. Twenty pages of the application are being withheld
pursuant to exemption 8 of the FOIA (examination information)
and one page of the application is being withheld pursuant to
exemption 6 of the FOIA (privacy exemption).
Hudson Valley FCU application
Hudson Valley FCU had objections to release of various sections
of its application pursuant to exemption 4 of the FOIA. We agreed
that some of the information should be withheld; other information
the credit union objected to is being released. Information from
the following sections is being withheld pursuant to exemption
4: one paragraph in section 1; several paragraphs in section 2;
parts of charts found in section 5; several pages in section 6;
all of section 7; parts of charts found in section 10; most of
section 11; all of section 13; and part of section 16. The pages
withheld in section 6 are also being withheld pursuant to exemption
6.
Mid-Hudson Valley FCU application
Mid-Hudson Valley FCU also had objections to release of various
sections of its application pursuant to exemption 4 of the FOIA.
Again, we agreed that some of the information should be withheld;
other information the credit union objected to is being released.
Information from the following sections is being withheld pursuant
to exemption 4: parts of 2 pages from section 1; several pages
from section 5; all of sections 6 and 7; and part of Appendices
A, C, and H. A July 31, 1998 supplement to the Mid-Hudson Valley
application was also submitted.
Attachments C and D to that supplement are also withheld pursuant to exemption 4. Home addresses and identifying numbers found in Appendix C and petitions and telephone surveys found in Appendix D
of the original application are withheld pursuant to exemption
6.
Exemption 4
Information withheld from the Hudson Valley FCU and Mid-Hudson
Valley FCU applications pursuant to exemption 4 includes: business
and marketing plans; information on credit union organizational
structure and management; certain financial information on select
employee groups within the field of membership; budget information;
member survey results; and credit union financial data broken
down by county. Voluntarily submitted community support letters
are also withheld.
Exemption 4 of the FOIA covers two categories of information: (1) trade secrets; and (2) information which is commercial or financial, obtained from a person and privileged or confidential. 5 USC 552(b)(4). All of the information withheld is within the commercial/financial category. The term "commercial" has been interpreted to include anything "pertaining or relating to or dealing with commerce", American Airlines, Inc. v. National Mediation Board, 588 F.2d 863, 870 (2d Cir. 1978). Information "obtained from a person" has been held to include information obtained from a corporation. Nadler v. FDIC, 92 F.3d 93, 95 (2d Cir. 1996). All of the information withheld pursuant to exemption 4 meets the broad interpretation of commercial or financial information. Information obtained from credit unions meets the standard of obtained "from a person" under Nadler.
The third requirement of exemption 4 is met if information is
"privileged or confidential." In Critical Mass Energy
Project v. NRC, 975 F.2d 871 (D.C. Cir. 1992), cert. denied,
507 U.S. 984 (1993), the court established two distinct standards
to be used in determining whether commercial/financial information
submitted to an agency is "confidential" under exemption
4. Information which is required to be submitted to a government
agency is subject to a stricter standard than information which
is voluntarily submitted to an agency. Except for the community
support letters which are no longer required to be submitted as
part of a community conversion application (see IRPS 98-1,
63 Fed. Reg. 4372, 1/29/98), all of the other information withheld
pursuant to exemption 4 falls within the required category. Under
this stricter "required to be submitted" standard, information
is confidential if it meets one of the two prongs of National
Parks & Conservation Association v. Morton, 498 F.2d
765 (D.C. Cir. 1974). The information is confidential under National
Parks if its release would (1) impair the Government's ability
to obtain necessary information in the future; or (2) cause substantial
harm to the competitive position of the person from whom the information
was obtained. National Parks at 770. We believe that
all of the required information withheld meets the second prong
of National Parks.
Information voluntarily submitted is afforded protection as "confidential"
information "if it is of a kind that would customarily not
be released to the public by the person from whom it was obtained."
Critical Mass, 975 F2d at 879. As noted in the above
paragraph, the community support letters were voluntarily submitted.
The credit union submitters (Hudson Valley FCU and Mid-Hudson
Valley FCU) claim they would not customarily release the community
support letters to the public. We agree that the letters should
not be released, at least not before the community conversion
applications are acted upon. These letters are therefore withheld
pursuant to the less strict "voluntary" standard set
forth in Critical Mass.
Exemption 6
The information withheld pursuant to exemption 6 includes a letter
from a credit union member containing personal information, home
addresses and identifying numbers and other personal information
about credit union board members and management; and identifying
details on member petitions and surveys.
Exemption 6 of the FOIA protects information about an individual
in "personnel and medical files and similar files" where
the disclosure of such information "would constitute a clearly
unwarranted invasion of personal privacy." 5 USC 552(b)(6).
The courts have held that all information which applies to a
particular individual meets the threshold requirement for exemption
6 protection. United States Department of State v. Washington
Post Co., 456 U.S. 595 (1982). Once a privacy interest is
established, application of exemption 6 requires a balancing of
the public's right to disclosure against the individual's right
to privacy. Department of the Air Force v. Rose, 425 U.S.
352, 372 (1976). The information withheld meets the threshold
requirement of exemption 6. The Supreme Court has held that the
public interest in exemption 6 information is to "shed light
on an agency's performance of its statutory duties." United
States Department of Justice v. Reporters Committee, 489 U.S.
749 (1989). The burden of establishing that disclosure would
serve the public interest is on the requester. Carter v. United
States Department of Commerce, 830 F.2d 388, 391 (D.C. Cir.
1987). No specific information regarding pubic interest in the
personal information being withheld was submitted. We acknowledge
that NCUA did not use exemption 6 in response to your group's
original FOIA request. However, most of the draft applications
are now being released. We believe the
individuals' privacy interests in the exemption 6 information
withheld outweighs any public interest in the information.
Exemption 8
Only the TEG FCU application contained exemption 8 information.
The information withheld includes CAMEL ratio and CAMEL code information
as well as other information pertaining to the financial stability
of the credit union.
Exemption 8 of the FOIA (5 USC 552(b)(8)) exempts information:
contained in or related to examination, operating
or condition reports prepared by, on behalf of, or
for the use of an agency responsible for the
regulation or supervision of financial institutions.
The courts have discerned two major purposes for exemption 8 from its legislative history; 1) to protect the security of financial institutions by
withholding from the public reports that contain frank evaluations
of a bank's stability; and 2) to promote cooperation and communication
between employees and examiners. See Atkinson v. FDIC,
1 GDS 80,034, at 90,102 (D.D.C. 1980). Either purpose is sufficient
reason to withhold an examination report.
NCUA has incorporated these dual purposes into its regulation. Section 792.11(a)(8) of the NCUA Regulations implements exemption 8 and adds the following:
This includes all information, whether in formal
or informal report form, the disclosure of which
would harm the financial security of credit unions
or would interfere with the relationship between
NCUA and credit unions.
Disclosure of the CAMEL and other financial information could affect the financial stability of the credit union. Hence, we have withheld this information pursuant to exemption 8.
Pursuant to 5 U.S.C. 552(a)(4)(B), you may seek judicial review
of this determination by filing suit to enjoin the NCUA from withholding
the documents withheld and to order production of the documents.
Such a suit may be filed in the United States District Court
in the district where the requester(s) reside, where requester(s)
principal place of business is located, the District of
Columbia, or where the documents are located (the Eastern District
of Virginia).
Sincerely,
Robert M. Fenner
General Counsel
GC/HMU:bhs
SSIC 3212
98-0824
Enclosures
cc: Concerned Credit Unions of the
Hudson Valley (w/out enclosures)
Joseph Melchione, Esq. (w/out enclosures)
Joseph Prokop, CEO, TEG FCU (w/out enclosures)